Watching Libya May 4, 2011

The Swiss financial regulator has located and frozen about $416 million Swiss banks assets belonging to Gheddafi or to the regime. They will remain frozen until a legitimate Libyan authority – able to provide documentation supporting its claim to the money – will claim the said assets. They are part of a find of almost $1 billion – which includes $474 million linked to Hosni Mubarak, and $69 million belonging to Tunisia’s Zine el-Abidine Ben Ali – announced on Monday, May 2, by Swiss president and foreign minister Micheline Calmy-Rey during a visit to Tunis.

Switzerland has been strengthening legislation to give the federal government power to seize and repatriate stolen assets. Five days after Ben Ali fled Tunisia, Swiss officials ordered banks to freeze assets belonging to him and his family. Only thirty minutes after Mubarak announced his leaving, Switzerland froze his assets. In Gheddafi’s case, all Libyan state assets in Switzerland where blocked as soon as the regime started bombing its own people. [See official Press Release of February 24, 2011 ‘The Federal Council condemns the use of force against the Libyan people and has blocked any assets held by Moammar Gheddafi in Switzerland’ Click here for original].

In other words, in the Libyan case, accounts containing assets that could be traced to or belong to Gheddafi and his clan were blocked even before – as in the Tunisian and Egyptian cases – the dictator gave up. The reasoning underlying the legislation is that a dictator’s wealth in Switzerland is deemed to be stolen from his people and can therefore be defined as originating from illegal activities. In a widely distributed op-ed, Calmy-Rey states: “The Swiss law on restitution is the first of its kind in the world: it enables assets that have been illicitly appropriated or embezzled by dictators to be returned to countries that are no longer in a position to use judicial processes to request its return from abroad.”

The Swiss position is clearly spelt out in the foreign affairs section of the official site of the government of the Swiss Confederation, quote: “Heads of state and high public officials (politically exposed persons, PEPs) who illegally enrich themselves through state funds deprive their state of capital and hinder the development of their country. These so-called potentate funds (dictators’ assets) are frequently sent out of the country and invested in international financial centres. Switzerland has a fundamental interest in ensuring that assets of criminal origin are not invested in the finance centre Switzerland. Swiss laws and procedures to combat money laundering, corruption and the financing of terrorism are effective means of keeping out potentate funds.”

The Swiss government has adopted a two-pronged approach to this issue. On the one hand, it promotes prevention of corruption in states with which Switzerland cooperates. This is a central declared principle of Swiss foreign and development policies. Concrete measures include, for example, the implementing of good governance programmes. All development cooperation agreements entered into by Switzerland with other states include corruption prevention clauses.

The provisions of Swiss anti-money-laundering legislation are also, of course, preventive measures. They compel Swiss providers of financial services not only to identify the party to the agreement, but also to establish the economic beneficiary. The Swiss Money Laundering Act makes provision for a special duty of clarification with regard to PEPs.  Banks and other financial intermediaries have to report suspicious transactions to the Money Laundering Reporting Office (MROS) and if these are substantiated, they must block the account concerned immediately. Swiss banking secrecy does not offer any protection against criminal prosecution either within Switzerland or in respect of international legal assistance.

The second aspect of the Swiss approach is the provision by Switzerland of legal assistance. Within this framework, Switzerland supplies the requesting state with details of suspicious accounts that can be used as evidence in criminal procedures or legal proceedings. Switzerland cooperates with the states concerned to find ways to return the assets to the rightful owners. It also considers it important that these funds do not flow back into the pool of criminal financial capital after being returned. If it is obvious that the origin of the funds is unlawful, Switzerland is even empowered to return the funds to the state concerned without a final and executable order of confiscation.

The Act on the Restitution of Illicit Asset (LRAI) is a response to the difficulties that the Swiss authorities experienced to return assets frozen in Switzerland to so-called “failing states” when the process of international mutual assistance fails to lead to a satisfactory outcome. To resolve cases of illicit assets of PEPs deposited in Switzerland, the law provides for freezing, forfeiture and restitution in cases when the state of origin of the assets  is not able to conduct a criminal procedure meeting the requirements of Swiss law on international mutual assistance.   [Click here for original]